I think you have the Capacity Limitation Jumper (CLJ) set up right now which is causing your problem.
See here for how to jumper your HDD. Jumper it to Cable Select and put the drive on the end connector of the IDE cable.
http://www.seagate.com/images/suppor...ta_jumpers.gif
If that isn't it... maybe backing up your data and doing a reformat and a clean install of XP will do the trick.